Crude Oil: The Backbone of Global Energy Trade

February 13, 2025

Crude oil is the raw, unrefined petroleum that comes out of the ground and becomes the feedstock for almost everything in the energy economy: gasoline, diesel, jet fuel, heating oil, lubricants, asphalt and the petrochemicals behind plastics. It is the largest single commodity traded internationally, and its price sets the tone for the rest of the energy market.

But “crude oil” is not one product. A barrel from one field can be light and sweet; a barrel from another can be heavy and sour. The difference decides which refinery can run it, what it yields, and what it is worth. That is why the trade is organised around grades, not around the word “oil”.

How crude oil is graded

Two figures travel with every cargo: API gravity and sulfur content. API gravity measures density — higher numbers mean lighter oil. Sulfur measures impurity — lower numbers mean sweeter oil. Together they place a barrel on the scale that refiners use to value it.

• Light sweet — high API, low sulfur. The easiest barrel to refine and usually the most valuable.
• Light sour — high API, higher sulfur. Needs desulfurisation but yields clean fractions.
• Heavy sweet — low API, low sulfur. More residue, but the residue is cleaner.
• Heavy sour — low API, high sulfur. The most demanding barrel, requiring complex upgrading.

Where crude oil is traded

Physical cargoes move on term contracts and spot deals, priced against benchmarks such as Brent, WTI and Dubai. The benchmark sets the reference price; the grade’s quality and the destination market set the differential. A cargo bound for a refinery configured for light sweet crude commands a different differential from the same barrel bound for a complex refinery that can handle sour grades.

The trade is also shaped by freight. A cargo that travels a short route carries a smaller freight cost than one that crosses an ocean, and the delivered price reflects that difference.

What crude oil becomes

A barrel is separated at the refinery into fractions, each with its own market. Light ends become LPG and naphtha; middle distillates become jet fuel and diesel; heavier fractions become fuel oil and asphalt. The yield pattern depends on the crude and on the refinery’s configuration, which is why a refiner will pay more for a barrel that matches its units.

What a buyer checks before fixing a cargo

Before a cargo is fixed, the buyer confirms the grade, the API and sulfur window, the volume, the loading port, the laycan and the inspection terms. The certificate of quality and the certificate of quantity travel with the shipment. The buyer also confirms that the discharge terminal can handle the grade, because a cargo that cannot be discharged is not a bargain.

Frequently asked questions

What is the difference between light and heavy crude? Light crude has higher API gravity and yields more transport fuels; heavy crude is denser and yields more residue. The difference drives the price differential.

Why does sweet crude cost more? Low sulfur means less processing to meet fuel specifications, so the refiner saves on desulfurisation and yields cleaner products.

Is crude oil priced the same everywhere? No. The benchmark sets the reference, but quality, freight and destination market set the differential.

What documents come with a crude cargo? Certificate of quality, certificate of quantity, bill of lading and the commercial invoice.

Explore the grades

For the quality scale in detail, see Light vs Heavy Crude. For specific export grades, see light crude oil and heavy crude oil.